One of the first written sources about the existence of Panormo village is Claudius Ptolemy in 2nd century AD, although it is not sure if Panormo is Pantomatrio, which Ptolemy mentions as the port of Eleftherna town. Pliny the Elder also mentions in his work a town called Panormus. The remains of the important early byzantine basilica of the 5th-6th century AD, which was dedicated to the Holy Wisedom and was excavated by Professor Kalokyris, proves that Panormo was an important town of that period. In 1206 the town was conquered by the Republic of Genoa led by Henrico Pescatore, who built a fortress in the area to protect the town. Some remains of this fortress still stand today. Even though Pescatore fortified the island, the Venetians seized Crete in 1212. The town was then named Castelli because of its fortress. During the Venetian rule, the town was the seat of the local administration, until 1647, when the Ottomans conquered it and partly destroyed it.

The little town was then called Panormo because of a small church dedicated to Saint George Panormos which was located on a small hill with the same name. In the early 20th century, Panormo revives and becomes a transit station for agricultural products coming from the inner land and travelling to the mainland of Greece. During this period, the town has large storage rooms, a primary and a secondary school, which was founded in 1917, a district civil court and a gendarmerie station. It was the capital of the municipality of Mylopotamos.

However, after the World War II, Panormo becomes a small fishermen village. The construction of the national highway (A90-E75), passing from its area, and of the small port give new perspectives to the village. Today, Panormo is a holiday destination, with a big hotel complex and several small ones. The church of the village is dedicated to the Ascension of Jesus and Saint George.